🚨 Jeonse Fraud

Today Korean Social News for Beginners | 2026.02.26

0️⃣ 3rd Anniversary of the Special Law — Blind Spots and Reform Challenges

📌 3 Years After the First Jeonse Fraud Victim — "We Can't Wait Any Longer for Law Reform"

💬 On the third anniversary of the first Jeonse fraud death, victim groups and civic organizations rallied outside the National Assembly to demand changes to the Special Law. They say the current law still leaves too many victims without help, despite some success in recovering deposits. Key demands include easier eligibility rules, a minimum compensation guarantee, and fixing problems in the public housing buyout process. Victims warn that without quick legislative action, more people will suffer.

💡 Summary

• Jeonse fraud happens when a landlord intentionally refuses to return a tenant's deposit, or tricks tenants through fake contracts.
• The Special Law is in effect, but strict eligibility rules mean many victims still cannot get help.
• Lawmakers are debating additional measures such as a minimum compensation guarantee and a public "bad bank."

1️⃣ What Is It?

Jeonse fraud means a landlord intentionally refusing to return a tenant's deposit, or tricking tenants by taking out excessive loans on the property or using fake contracts to steal the deposit. When house prices fall at the same time, the damage can be enormous — and when many tenants are affected at once, it becomes a social crisis.

In simple terms: a landlord signs a Jeonse contract with no intention of returning the deposit, or rents out a house that already has too much debt — and when the house goes to auction, the tenant loses everything. Because Jeonse requires handing over a large lump sum, fraud can cause devastating financial losses.

💡 Why Does This Matter?

• For many tenants, the Jeonse deposit is their entire savings. Losing it can destroy their lives.
• Korea's unique Jeonse system means that when house prices drop, thousands of victims can be hit at the same time.
• The longer victims go without help, the worse the housing insecurity — and the less people trust the rental market.
• When the law fails to protect victims quickly, the cost to society grows even larger.

2️⃣ Current Situation and Key Issues

📕 What the Special Law Has — and Hasn't — Done

• The Special Law passed, but many victims still fall through the cracks. Key points include:

  • The Jeonse Fraud Special Law was enacted in 2023. Recognized victims can receive benefits such as auction delays, priority buyouts by LH (Korea Land and Housing Corporation), and low-interest loans.
  • However, the eligibility requirements are strict, and many victims are still unable to qualify for support.
  • Properties with illegal structures or complicated ownership claims are often excluded from the LH buyout program.
  • In practice, very little of the deposit is actually recovered through auction, so victims feel the law isn't working.

• Victim groups are demanding reform as the 3rd anniversary approaches. Key demands include:

  • Relax the eligibility rules so more victims can receive support.
  • Introduce a minimum recovery rate — guaranteeing victims get at least some portion of their deposit back.
  • Reduce the types of properties excluded from LH buyouts, and fix the auction defense bidding system.
  • If the government and National Assembly don't act soon, more victims will be left with nothing.

📕 Structural Problems

• The Jeonse system itself has built-in risks that made this crisis worse. Key issues include:

  • In Jeonse, tenants hand over a large sum of money. If house prices fall below the deposit amount, repayment becomes impossible.
  • Many landlords used tenant deposits to buy more properties ("gap investing"), and when prices fell, the whole structure collapsed.
  • Even if a tenant checks the property registry before signing, it's hard to see all the hidden debts.
  • Jeonse deposit insurance is not mandatory, so many victims had no protection at all.

• Tenants are not well protected in the auction process. Key limitations include:

  • When a house goes to auction, tenants are paid last — after banks and other creditors — so they rarely recover the full deposit.
  • The "small-amount priority repayment" rule exists, but the protected amount is too low to cover most Jeonse deposits.
  • Public agencies sometimes give up on exercising their right to buy properties because of complicated legal situations.
  • While legal procedures drag on, victims lose their homes and face severe financial hardship.

💡 Key Issues in the Jeonse Fraud Crisis

1. Eligibility gap: Strict Special Law criteria leave too many victims unprotected
2. LH buyout limits: Properties with illegal structures or complex ownership are excluded
3. No minimum guarantee: There is no rule ensuring tenants recover even a minimum portion of their deposit
4. Auction structure: Tenants are paid last in auction proceeds, recovering very little
5. Slow legislation: Government and National Assembly reforms are lagging behind victims' real needs

3️⃣ How to Fix the System

✅ Reform the Special Law and Broaden Eligibility

• The criteria for recognizing victims need to reflect reality. Key directions include:
  • Review and expand the types of cases covered under the Special Law.
  • Consider including properties with illegal structures or multi-unit buildings in the LH buyout program.
  • Simplify the victim reporting process so people without legal knowledge can access help easily.
  • Extend the law's time limit to cover victims who have not yet received support.

✅ Introduce a Minimum Guarantee and a Bad Bank

• A floor must be set so victims can recover at least part of their deposit. Key proposals include:
  • Introduce a minimum guarantee that ensures tenants receive a set percentage of their deposit, regardless of auction results.
  • Consider establishing a public "bad bank" to take over and resolve properties with complicated legal issues.
  • Carefully weigh the budget cost and fairness concerns of a bad bank to build a sustainable structure.
  • Phase in mandatory Jeonse deposit insurance to prevent new victims going forward.

4️⃣ Key Terms Explained

🔎 The Jeonse System

• Jeonse is a uniquely Korean rental system where tenants pay a large lump sum instead of monthly rent.
  • In Jeonse, a tenant pays a large deposit (called "jeonse-money") to the landlord and lives in the property rent-free. When the contract ends, the landlord returns the full deposit.
  • For landlords, the deposit is useful capital for investment. For tenants, it means no monthly rent payments. However, if house prices fall below the deposit amount, or if the landlord cannot repay debts, the deposit may not be returned.
  • In recent years, rising interest rates and falling house prices have created more "reverse Jeonse" situations — where the deposit exceeds the current market value of the property. This has combined with fraud to create a major social crisis.

🔎 Jeonse Fraud Special Law

• A temporary law created specifically to help Jeonse fraud victims.
  • The Special Law (official name: Special Act on Support for Jeonse Fraud Victims and Housing Stability) was enacted in 2023 after large-scale fraud cases came to light. Recognized victims can receive auction delays, priority property buyouts by LH, and low-interest loans.
  • To qualify, a victim must have filed a criminal complaint with investigators, and must meet specific eligibility requirements. Critics say the requirements are too strict and the process too complicated — so fewer victims than expected are actually getting help.
  • Victim groups are pushing to relax the eligibility rules, reduce excluded property types, and extend the law's duration.

🔎 Small-Amount Priority Repayment

• A rule that lets small-deposit tenants get paid first when a property goes to auction.
  • Under Korea's Housing Lease Protection Act, tenants with small deposits can receive a set amount before banks and other creditors are paid — if the property goes to auction or forced sale.
  • The protected amount varies by region and deposit size. In Seoul, for example, tenants below a certain deposit threshold get a guaranteed payout up to a set limit. But this limit is often far below the actual Jeonse deposit, so victims rarely get their money back in full.
  • Since the fraud crisis, advocates have called for raising these limits and broadening who qualifies for protection.

🔎 Bad Bank

• A public body that takes over troubled assets to reduce market chaos.
  • A "bad bank" is an organization — usually publicly funded — that buys up troubled or hard-to-resolve assets during a financial crisis, so normal markets can recover. In the Jeonse fraud context, it refers to a proposed public entity that would buy properties with complicated ownership structures that no one else can resolve.
  • If a bad bank were created, victims would not have to fight complex legal battles alone. The public body would step in, acquire the property, and partially compensate victims. However, this requires significant government funding — raising questions about whether it's fair to ask taxpayers to cover losses caused by fraud.
  • Experts say a bad bank could be an effective short-term solution, but that long-term fixes — like mandatory deposit insurance and stronger rental registration requirements — are even more important.

5️⃣ Frequently Asked Questions (FAQ)

Q: How can I protect myself from Jeonse fraud before signing a contract?

A: Check the property registry, get deposit insurance, and register your move-in date right away.

• Before signing, always check the official property registry (등기부등본). Look for how much existing debt — mortgages, liens, etc. — is already on the property. If the combined amount of debt and your deposit exceeds 70–80% of the property's market value, treat it as a warning sign.
• Jeonse deposit insurance (from HUG or SGI Seoul Guarantee) means that if your landlord can't return your deposit, the insurer pays you back. After moving in, register your new address at the local community center (주민센터) and get your "confirmed date" (확정일자) stamped — this gives you legal priority in any future auction. Always transfer your deposit directly to the landlord's registered bank account, and verify your real estate agent's license before signing anything.

Q: What should I do if I've already been defrauded?

A: File a police report right away, and contact the Jeonse Fraud Victim Support Center for help.

• If your landlord refuses to return your deposit or disappears, file a criminal complaint with the police immediately. Being recognized as a victim under the Special Law requires an active criminal investigation as a precondition.
• Contact the Ministry of Land, Infrastructure and Transport's Jeonse Fraud Victim Support Center (1533-8119) or the Korea Legal Aid Corporation. They can guide you through legal options based on your situation. If your property is already in auction, act quickly — deadlines for applying for auction delays or LH priority buyouts are strict. Don't try to handle everything alone; get support from official agencies and legal professionals.

Q: What changes if the Special Law is revised?

A: Easier eligibility and a minimum guarantee would mean more victims get real help.

• If the eligibility criteria are relaxed, people currently excluded from legal protection — including those in properties with illegal structures or complicated ownership — could finally receive support.
• A minimum guarantee would create a safety net so that victims recover at least a percentage of their deposit, no matter what happens at auction. However, law reform requires National Assembly approval and budget allocation, so it takes time. If you are a victim right now, don't wait for new laws — apply for every available form of support under the current system as soon as possible.

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